What is an Accountable Care Organization?

Accountable Care Organizations (ACOs) are networks or organizations of health care providers that agree to work together and become accountable for the quality, cost, and overall care of Medicare beneficiaries for which they provide services to. An ACO can be comprised of a group of physicians who are part of a group practice, networks of individual practices, hospitals employing physicians, or even joint ventures/partnerships made of a combination of these various entities. Regardless of how an ACO is formed, it is required that it is a legal entity recognized and authorized under state law and it must also have a Taxpayer Identification Number.

How did ACOs come about?

It has been widely noted that Medicare costs are expected to increase significantly in the near future. The significant increase is due to factors such as rising healthcare costs, a jump in the number of baby boomers entering their retirement age, as well as an increase in the longevity of the overall population. In addition, the healthcare system as currently designed is fragmented in a way that, because of the lack of proper communication between provider parties, some Medicare beneficiaries receive the same or similar care from multiple physicians. This fragmented system has proven to contribute to the overall inefficiency in coordinating care, increases in duplicative procedures, and an increase in the number of medical errors. In order to mitigate these rising costs and improve coordination of our healthcare system, Congress has passed the Patient Protection and Affordable Care Act. This Act is what has led to the creation of the Accountable Care Organization.

As currently constituted, an ACO is defined as a group of providers and suppliers that will work together to coordinate care for Medicare beneficiaries. The goal of the ACO is to improve the communication and efficiency between physicians, patients, and other healthcare providers working with the ACO. This improved communication will help advance the level of care Medicare beneficiaries receive while at the same time reduce overall costs to all parties involved. The Department of Health and Human Services projects that the implementation of ACOs could save Medicare $960 million in the first three years.

Advantages of an ACO:

Under the proposed regulations, Medicare would continue to pay individual healthcare providers based on the traditional fee-for-service payment system. In addition to the traditional fee-for-service payments, the ACO may be able to qualify for a savings-based program called the Medicare Shared Savings Program (MSSP). The Center for the Medicare & Medicaid Services (CMS) is in the process of developing a benchmark where ACOs are measured against ACO performance standards. If the ACO meets the appropriate qualifications and quality control requirements put in place by the CMS, they will receive additional payments in addition to the traditional fee-for-service payment system. This incentive could prove to be very lucrative for ACOs that operate effectively and it will also help the government achieve its goal to reduce healthcare costs and create a more efficient healthcare system.

Disadvantages of an ACO:

As discussed previously, an ACO participating in the MSSP that exceeds the minimum savings rate, meets certain minimum quality performance standards, and maintains their eligibility to participate in the MSSP will receive payments for a portion of the savings that is created by all ACOs. However, qualifying for this program may prove to be difficult. The American Medical Group Association (AMGA) commented on the proposed program requirements stating that the benchmark standards are “overly prescriptive, operationally burdensome, and that the incentives are difficult to achieve.” The AMGA is one of many medical associations that have expressed similar concerns.

Another disadvantage is the initial outlay of significant capital required to establish and sustain an ACO. CMS had previously estimated the costs to be in the range of $1.8 million. However, a study conducted by the American Hospital Association concluded the costs are many times higher than the CMS estimated costs and actually range between $11.6 million and $26.1 million. As a result, it’s possible that only established integrated healthcare providers with large amounts of capital will be able to form an ACO. The small and medium sized practices may not be able to afford such an initial investment and will run into difficulties in forming and/or competing against larger ACOs.

Recent Developments:

Many medical associations believe that the formation of the ACO is a step in the right direction to make America’s healthcare delivery system more accountable and more focused on value rather than volume. However, these associations also appear to be discouraged by the proposed ACO regulations. Stakeholders of such a transition had until June 6, 2011 to offer comments and feedback on these proposed regulations. Many of the large medical associations, such as the AMGA, used this opportunity to express their concerns to the CMS, as noted above.

At this point, no additional guidance or literature from the CMS has been released. As a result, healthcare providers will have to wait and see whether or not the CMS and the various other federal agencies involved in drafting ACO regulations will take the feedback and concerns voiced by the industry it actually affects into consideration when issuing the final regulations.

For current information pertaining to ACOs and recent regulation updates, please visit the Center for Medicare and Medicaid Services webpage (www.cms.gov) and/or the Department of Health and Human Services webpage (www.hhs.gov).

Sansiveri is pleased to announce that Susan B. Windle, CPA, MST, has been named a partner of the firm. Susan has over 30 years of public accounting experience, providing advisory, tax planning, and tax compliance services for corporate, partnership and individual tax clients. Susan counsels clients in ways to structure financial transactions and maximize the use of the ever-changing federal and state laws to minimize tax liabilities. She advises businesses and their owners in all areas of income tax and estate planning.

“Susan is well-deserving of this promotion. The firm and our clients have been very fortunate to have her talents and abilities available since 1984. We look forward to her continued leadership in her new role with Sansiveri.” said Michael A. DeCataldo, Managing Partner of Sansiveri. ” We are all excited to have her as a member of the partnership”.

In addition to the advisory and tax services Susan provides, she is team leader of Sansiveri’s healthcare specialty group, where she provides professional expertise in the rapidly changing healthcare environment. She provides insight into business operations, assisting clients with ways to maximize income, gain control over expenses, and reduce risk and liability. Susan also counsels clients on strategic business planning by providing tangible solutions for improving profitability; advises on medical group expansion and consolidation of practices; and provides assistance with succession planning.

Susan is a Certified Public Accountant (CPA). Her educational background includes a Master of Science in Taxation from Bryant University and a Bachelor of Science degree in Accounting from Providence College.

Active in the professional community, Susan is a member of the finance committee of the Providence Ronald McDonald House. She is also a member of the Estate Planning Council of Rhode Island, the National CPA Healthcare Advisors Association; the American Institute of Certified Public Accountants and the Rhode Island Society of Certified Public Accountants.